Jinks57: I am not a qualified economist but I think I have a basic grasp of the principles of currency exchange, for which reason I dismiss the idea that there is any "plan" to get the £ down to 1:1 euro so that we can join the eurozone. Fact is that a currency can join the eurozone at just about any rate at any time, as long as the country owning that currency complies with the criteria laid down by the EU members. Yes we know that they have bent the rules about all sorts of stuff in the past, particularly lately about the proportion of GDP the nation's debts are allowed to represent, but even so there are no rules to say that a currency has to be at parity before joining.
The Treasury say obscure things like "we will join when it is to our advantage to do so" hinting that they would like the £ a bit stronger, but then they blow it by "quantitative easing" which sends the opposite message to the markets. The PM has been travelling over the world selling the benefits of QE to all and sundry, to mitigate the effect in the UK alone, and so worldwide public sector debt reaches record levels.
Long-term interest rates in the UK have always been higher than mainland europe and the USA and I'm not sure why, but in that fact lies our longer term scenario. As they rise, the £ will also strengthen. The currency speculators will then make sure that the rise goes beyond what would otherwise be a sensible level, just as they have done on the downside with the euro and dollar recently.
But the EU is a formidable competitor for UK business, and the £ cannot be allowed to get too strong as it makes exports uncompetitive. But with eastern bloc members (and the likes of Brazil, Russia, India and China) having such low labour costs, I think the deck is loaded against us.
